A theorem on multi-period insurance contracts without commitment

✍ Scribed by Francisco J. Vázquez; R. Watt

• Book ID: 104300024
• Publisher: Elsevier Science
• Year: 1999
• Tongue: English
• Weight: 70 KB
• Volume: 24
• Category: Article
• ISSN: 0167-6687
• DOI: 10.1016/s0167-6687(98)00057-2

✦ Synopsis

In a multi-period setting that is equivalent to the classic Rothschild-Stiglitz adverse selection situation, we prove that if insurers do not gather information on accidents over time, then the inability to commit to contract renewals is sufficient for the optimal contract sequence to be periodic repetition of the Rothschild-Stiglitz single-period equilibrium.